United Arab Emirates PMI January 2018

United Arab Emirates: PMI remains elevated in January

February 5, 2018

The Emirates NDB Purchasing Managers’ Index (PMI) dipped from December’s multi-year high of 57.7 to 56.8 in January. However, the index was still firmly above the 50-threshold that separates expansion from contraction in the non-oil producing private sector.

January’s figure was underpinned by continuing strong growth in output and new orders. New export orders also rose—for the second consecutive month—likely buoyed by strong global economic growth. On the back of robust economic activity, firms stepped up hiring efforts, with the rate of job creation the fastest in 12 months. Despite this, backlogs of work rose. As expected, the introduction of VAT from 1 January led to an acceleration in input costs, which increased at the fastest pace in over six years. The implementation of the new tax was also likely behind the marked fall in purchasing activity and input buying in January, as firms stocked up towards the end of last year.

According to Khatija Haque, Head of MENA Research at Emirates NBD: “The impact of VAT is evident in the sharp rise in input costs last month. While selling prices also increased in January, the survey suggests that the full rise in input costs was not passed on to consumers.”